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Essays on Volatility and Time Varying Conditional Jumps in Thinly Traded African Financial Markets

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dc.contributor Svenska handelshögskolan, institutionen för finansiell ekonomi och ekonomisk statistik, finansiell ekonomi fi
dc.contributor Hanken School of Economics, Department of Finance and Statistics, Finance fi
dc.contributor.author Kuttu, Saint
dc.date.accessioned 2012-07-30T07:04:04Z
dc.date.available 2012-07-30T07:04:04Z
dc.date.issued 2012-07-30
dc.identifier.isbn 978-952-232-172-5
dc.identifier.issn 2242-699X
dc.identifier.uri http://hdl.handle.net/10138/35505
dc.description.abstract The 2008 financial crisis brought to the fore the relative resilience of emerging and frontier equity markets. This has made international investors to turn their attention to emerging and frontier equity markets to minimise their down side risk exposure. Against this backdrop, it is important for international investors to understand and appreciate the unique features such as pervasive thin trading and severe illiquidity which impact on the evolution of returns and volatility in these equity markets. This thesis, which consists of three essays, examines the first and the second moment dynamics in thinly traded African equity markets. The main findings of the first essay suggest a reciprocal return stimuli spillover between Ghana and Kenya, and between Nigeria and South Africa. South Africa passes past return stimuli to Kenya and Nigeria but receives none. In the second moment, however, Nigeria appears to be the dominant one. Specifically, Nigeria exports volatility stimuli to Kenya and South Africa and receives none. Bad news from Kenya increases volatility on the equity market of Ghana more than good news of equal magnitude from the same source. Also, for the equity markets of Ghana, Nigeria and South Africa, changes in volatility in the four markets from domestic shocks are comparatively more important than the innovations from the other markets. Essay two reports a bi-directional mean relationship between the equity and foreign exchange markets of Ghana. Also past returns in the foreign exchange market influence current returns in the equity market of Nigeria. In the second moment, previous volatility in the equity market of Ghana influences current volatility in the foreign exchange market and not vice versa. In addition, political violence related negative news affects the equity and the currency markets of Nigeria, but for Ghana, it only affects the equity market. Furthermore, ethnic violence related negative news affects respectively the returns of the equity and the foreign exchange markets of Ghana and Nigeria. Only the volatility in the foreign exchange markets of Ghana is sensitive to political violence related news. The findings in essay three suggest that conditional jumps are time varying, and jumps are sensitive to past shocks for the equity markets of Egypt and South Africa. For Nigeria, however, the jump intensity is constant. Jump sensitivity is persistent in all the equity markets, and only the equity market of South Africa displays jump volatility asymmetry. Overall, this thesis which, adjusted for thin trading before the models were applied, sheds light on the importance of the proper handling of the thin trading issue in order to minimise spurious dependencies from plaguing the results. fi
dc.language.iso en fi
dc.publisher Svenska handelshögskolan fi
dc.publisher Hanken School of Economics fi
dc.relation.ispartofseries Economics and Society – 245 fi
dc.subject returns fi
dc.subject volatility fi
dc.subject interdependence fi
dc.subject thin trading fi
dc.subject equity fi
dc.subject negative news fi
dc.subject foreign exchange fi
dc.subject conditional jumps fi
dc.subject poisson process fi
dc.subject ARJI-GARCH fi
dc.subject emerging equity markets fi
dc.subject.other Finance fi
dc.title Essays on Volatility and Time Varying Conditional Jumps in Thinly Traded African Financial Markets fi
dc.date.accepted 2012-08-09

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